The primary authoritative guidance on accounting for environmental obligations is contained in ASC 410-30, Asset Retirement and Environmental Obligations, Environmental Obligations. ASC 410-30 provides guidance for recognizing a liability for obligations associated with environmental remediation liabilities. This guidance consists principally of three parts: (1) a non-authoritative overview of important environmental laws and regulations, (2) authoritative guidance with respect to the recognition, measurement, and presentation and disclosure of environmental remediation liabilities, and (3) implementation guidance and illustrations.
ASC 410-30 includes guidance governing the measurement of an estimated environmental remediation liability, including which costs to include in the estimate, how to consider the effects of future developments, and how to allocate the liability between involved parties (referred to as potentially responsible parties). The recognition criteria outlined in ASC 410-30 generally follows the guidance of ASC 450-20, Contingencies, Loss Contingencies. Although environmental remediation liabilities are not one of the examples discussed in ASC 450, Contingencies, these liabilities are nevertheless loss contingencies and the discussion in ASC 450-20-55-10 through ASC 450-20-55-17 is useful in understanding the requirements of ASC 410-30.
The provisions of ASC 410-30 do not apply to the accounting for asset retirement obligations (AROs). Instead, AROs are governed by the authoritative guidance of ASC 410-20, Asset Retirement and Environmental Obligations, Asset Retirement Obligations. The scope of ASC 410-30 differs from ASC 410-20 in that ASC 410-30 addresses a liability that results from the improper operation of an asset, whereas ASC 410-20 addresses obligations that arise due to the normal operation of an asset. See PPE 3 for more information on accounting for asset retirement obligations under ASC 410-20.
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